Why You’re Not In the Business You Think You’re In

When I start advising a company, a few conversations into our relationship I get to work on one of my favorite exercises: I ask the management team to figure out what business it is really in.

Sure, every business starts up around the concept of delivering a certain product or service. That product or service is the response I usually get, because that’s often where founders or executives stop when it comes to thinking about or describing their business. And that’s not enough. I make them get down to their core to look at what they are really doing or what they are really passionate about.

In the end, I always find that they are in a completely different business than this initial narrow response–and the business they’re really in is usually a lot cooler.

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Take Starbucks for example. Most people would say that Starbucks sells coffee. True. Fine. But what it really sells is an experience–a place to hang out, work, and socialize. Starbucks wants to be the place you stop first thing in the morning, in the middle of the day, and last thing in the evening. Coffee is what you buy; the fact the barista remembers your name and there are comfortable places to hang out is why you come back over and over.

If you concentrate too much on what you do or the product you sell, your product or service becomes a commodity–something that can be found on any shelf or street corner. When that happens, your only differentiators are price and options. It is far better and very important to take the time to understand what makes you and your company special.

So think about it: What do you do better than anyone else?

Examples of companies defining themselves by their greater purpose can be found in their tag lines:

Each of these companies sells a product. But more than that, each sells a promise or a feeling. So take a step back and think about what business you are really in. What do you provide that makes your customers love and need you? That’s the business you’re really in.